E-commerce: a risky boom for international supply chains

What’s easily shopped online needs to be shipped in a safe and compliant way in the physical world. (Photo by rawpixel on Unsplash)

Air freight peak season is in full swing – and about to get even busier.

Big e-commerce dates are all happening in November, starting with Singles’ Day on November 11, followed by Black Friday on November 23, and Cyber Monday on November 26.

While Cyber Monday and Black Friday are traditionally US events, and Singles’ Day is thought of as a Chinese occasion, you can see these growing into global shopping (and shipping) events, with the air freight volumes to prove it.

E-commerce is the fastest-growing sector driving global air freight volumes. Lucas Kuehner, Panalpina’s global head of Air Freight, said in a blog post earlier this year: “We have gone from zero to an estimated 20,000 tons [of e-commerce air freight] in only two years. The actual figure is likely to be higher.”

Big online marketplaces and their suppliers are Panalpina’s most important e-commerce customers. This market is getting bigger as traditional stores are also increasingly turning to e-commerce, and to air freight. In its classic role as a consolidator, Panalpina is also interesting for smaller e-commerce customers.

“When doing e-commerce air freight you have to know exactly what you’re doing and deliver with speed and consistency. That includes staying on top of customs as well as dangerous goods and security regulations, because nothing can go wrong,” said Kuehner.

The boon and bane of freight consolidation for international e-commerce

Unhindered by national borders, legions of consumers will go online this month to purchase products online. After the final, effortless click, their international orders will be consolidated, transported and de-consolidated – often multiple times.

“Only freight consolidation can make international e-commerce shipments affordable in the first place. Otherwise, transport costs, especially for air freight, would be too high and often in no relation to the price of the purchased product,” explains Kuehner.

“But the consolidation comes with challenges. In many cases, the original shipper details and the product information get diluted by a single commodity list provided under the name of the consolidator, who deals directly with a freight forwarder such as Panalpina. That makes e-commerce cargo riskier than other cargo.”

Freight forwarders, airlines, regulators and authorities are faced with three main challenges:

Firstly, third-party screening for compliance and security becomes difficult since the original shipper details are not transparent at the time of shipment booking.

Secondly, counterfeit and other forbidden illegal items can lead to delays and customs penalties for the shippers.

So what does Panalpina do to mitigate risk in the international e-commerce supply chain as much as possible?

First of all, Panalpina handles e-commerce freight as a restricted commodity, meaning it requires prior approval from the company’s standards and governance experts, who evaluate the shipper, the commodity, and other shipment parameters and identify potential risks.

Panalpina has put in place global standard operating procedures for e-commerce freight to ensure a safe and seamless process from booking acceptance to handover to the carriers.

The company has also enhanced its shipper’s declaration for regulatory compliance to specifically address e-commerce-related risks. The amended declaration allows Panalpina, with the consent of the shipper, to perform physical checks and cargo security screenings when deemed necessary.

All of these measures mitigate risk in international supply chains that are inherent to the global boom of e-commerce.

The majority of these orders will come from within China. However, with Alibaba’s significant and growing presence in international markets across Asia, Europe and Latin America, scores of products will have to be shipped to consumers the world over too.

Panalpina is here to help in the background, playing a discreet but important role in ensuring that international e-commerce shipments comply with customs, dangerous goods and security regulations.

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The 2018 air freight peak season is due to begin after Chinese Golden Week. Many trade lanes have already seen double-digit rate increases and further increases are expected. Panalpina has secured extra flights and ensured readiness on the ground and is also testing a new charter tool, which provides an overview of scheduled cargo flights and of all cargo aircraft available for chartering.

2017 has been an exceptional year for air freight. The market has developed a new dynamic characterized by tight transport capacity and high freight rates. Panalpina’s early prediction of a very busy peak season in the last quarter turned out to be correct. In October, Panalpina recorded its highest ever monthly Air Freight volumes, a record that was beaten only one month later in November.

Panalpina is the first freight forwarder to subscribe globally for digital IATA manuals access. Panalpina Air Freight specialists worldwide can now access online the latest regulations and industry standards. This way, Panalpina offers faster and even more efficient services while ensuring safer and greener Air Freight operations.

E-commerce is the fastest growing sector driving global air freight volumes. Panalpina's global head of Air Freight, Lucas Kuehner, explains Panalpina's approach to air freight for e-commerce, and what it takes to be successful in that business where nothing can go wrong - while making sure that regular air freight customers do not lose out on capacity come the peak season.

Everyone is talking about peak season, but this can mean different things. In his latest Quintessential installment, Quint Wilken, Global head of Air Freight Perishables, explains the difference between the general cargo peak season and the perishables peak seasons, and how they influence one another.